Explanatory Memorandum
(Circulated by authority of the Treasurer, the Hon Peter Costello, MP)Chapter 3 - Technical corrections to foreign tax credit provisions
Outline of chapter
3.1 Schedule 3 to this bill contains the following minor amendments that ensure that provisions for allowing foreign tax credits to arise in particular circumstances will continue to operate properly following changes to the foreign tax credit provisions that were made as a result of the Timor Sea Treaty.
3.2 Unless otherwise stated, references to legislative provisions are references to provisions contained in the Income Tax Assessment Act 1936.
Context of amendments
3.3 Changes to the particular foreign tax credit provisions are needed to ensure those provisions refer to the correct paragraph in the general foreign tax credit provision as these have been recently amended as a result of the Timor Sea Treaty.
Summary of new law
3.4 A change to the numbering of paragraphs in subsection 160AF(1) (which is the general foreign tax credit provision) as a result of the Timor Sea Treaty has been reflected in two special foreign tax credit provisions (sections 160AFCD and 160AFCJ).
Detailed explanation of new law
3.5 These amendments do not result in any policy changes to the law and are purely technical corrections.
3.6 Section 160AFCD provides the mechanism for allowing a foreign tax credit to arise for certain amounts that are non-assessable and non-exempt income under section 23AI.
3.7 Section 160AFCJ provides the mechanism for allowing a foreign tax credit to arise for certain amounts that are non-assessable and non-exempt income under section 23AK.
3.8 The amendments to sections 160AFCD and 160AFCJ ensure the correct paragraph in section 160AF is referenced. [Schedule 3, item 1, paragraph 160AFCD(1)(a); item 2, subsection 160AFCJ(2)]
3.9 The amendments to sections 160AFCD and 160AFCJ are made as a consequence of the changes to section 160AF which were made as a result of the Timor Sea Treaty.
Application and transitional provisions
3.10 The amendments to sections 160AFCD and 160AFCJ (dealing with amounts of foreign tax) are consequent on the changes to section 160AF and will apply from the time this bill receives Royal Assent.